BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 401|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 401
Author: Dodd (D), et al.
Amended: 9/2/15 in Senate
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 8-1, 6/30/15
AYES: Hueso, Cannella, Hertzberg, Hill, Lara, Leyva, McGuire,
Pavley
NOES: Morrell
NO VOTE RECORDED: Fuller, Wolk
SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza, Nielsen
NOES: Bates
ASSEMBLY FLOOR: 55-22, 6/2/15 - See last page for vote
SUBJECT: Low-Income Water Rate Assistance Program
SOURCE: Author
DIGEST: This bill requires the State Water Resources Control
Board (SWRCB), in collaboration with the State Board of
Equalization and stakeholders, to develop a plan for the funding
and implementation of a new program to provide water rate relief
for low-income ratepayers by January 1, 2018 and provide a
corresponding report to the Legislature by February 1, 2018.
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Senate Floor Amendments of 9/2/15 changes the date by when the
plan for the Low-Income Water Rate Assistance Program is
required of the SWRCB from 2017 to 2018, as well as the
corresponding report to the Legislature. Additional amendments
insert language to make the report requirements of the bill
inoperative beginning in 2022.
ANALYSIS:
Existing law:
1)Establishes the California Public Utilities Commission (CPUC)
to regulate privately owned public utilities in California.
(Article XII of the California Constitution)
2)Requires the CPUC to establish the California Alternate Rates
for Energy (CARE) program of assistance to low-income electric
and gas customers with an annual household income not greater
than 200 percent of the federal poverty guideline levels.
(Public Utilities Code §739.1)
3)Provides that access to an adequate supply of healthful water
is a basic necessity of human life, and shall be made
available to all residents of California at an affordable
cost. (Public Utilities Code §739.8)
4)Requires the CPUC to consider programs to provide rate relief
for low-income ratepayers of water corporations. (Public
Utilities Code §739.8)
5)Provides that a fee encompasses any levy other than an ad
valorem tax, a special tax, or an assessment, imposed by an
agency upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a
property related service. (California Constitution Article
XIII D)
6)Requires the SWRCB to administer provisions relating to the
regulation of drinking water to protect public health,
including, but not limited to, conducting research, studies,
and demonstration programs relating to the provision of a
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Page 3
dependable, safe supply of drinking water, enforcing the
Federal Safe Drinking Water Act, adoption of enforcement
regulations, and conducting studies and investigations to
assess the quality of water in domestic water supplies.
(Water Code §174 et seq)
This bill:
1)Requires the SWRCB, in collaboration with the State Board of
Equalization and stakeholders, to develop a plan to fund and
implement of a new program to provide water rate relief for
low-income ratepayers by January 1, 2018.
2)Requires the SWRCB to report its findings to the Legislature
by February 1, 2018, including the feasibility, financial
stability, and desired structure of the program, and any
recommendations for legislative action.
3)Makes the requirements for submitting a report inoperative on
February 2022, pursuant to Section 10231.5 of the Government
Code.
Background
CPUC's regulation of water utilities. The CPUC has jurisdiction
over 113 privately owned water utilities: nine Class A water
utilities (10,000 or more connection points); five Class B water
utilities (2,000 or more connection points); 25 Class C water
utilities (500 or more connection points); and 74 Class D water
utilities (less than 500 connection points). Combined, these
utilities deliver water service to roughly 16 percent of the
state's population (about 6 million residents). The CPUC
regulates all aspects of the privately owned utilities' service
provision, including assessing their rates to ensure they are
reasonable, while providing a reasonable rate of return to
continue to provide customers service and satisfy shareholders.
Publicly owned water utilities. The majority of California's
water customers are served by cities, water districts, and
mutual water companies, which are governed by local boards who
are not regulated by the CPUC. As established by Proposition
218 (1996), the majority of these utilities are subject to state
constitutional and statutory requirements that ensure water
rates are restricted to cost of service. As a result, these
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entities have limitations, not imposed on the IOUs, that hinder
their ability to increase rates to fund low-income programs for
their customers.
CPUC low-income assistance for water ratepayers. Of the
privately-owned utilities, the CPUC has authorized the largest
nine water utilities to offer low-income rate assistance
programs similar in concept to those provided to electricity
customers through CARE. However, each program is varied in
terms of the amount of the assistance provided to low-income
customers and the collection of the surcharge from
non-participating ratepayers to cover the cost of the program.
Combined, the nine largest utilities serve approximately 1.175
million customers.
In CPUC Decision D.11-05-020, the CPUC ordered large water and
energy utilities to exchange information about their low-income
customers to cross-promote the goal of increasing participation
in both programs. Reports from the CPUC indicate the effort has
yielded a substantial increase in participation in these
programs.
The case of Lucerne. The challenge to adopt a low-income
assistance program is daunting for smaller agencies who have
limited base of ratepayers to share the increased costs for the
program.
In July 2012, the privately-owned water company Cal Water filed
a request with the CPUC for a water rate increase of 77 percent
over three years to ratepayers in Lucerne located in Lake County
and one of several Cal Water service territories. With a median
annual household income of approximately $25,000, Lucerne's
household income is well below the state's average of roughly
$61,000. Cal Water's proposed rate increases would have doubled
the average resident's water bill, from about $63 to $124 per
month. Ultimately, the CPUC, Cal Water, Lake County and other
parties entered into a settlement that would not drastically
increase water rates in Lucerne. The settlement also provided
adjustments to the Cal Water Low-Income Ratepayer Assistance
Program. Additionally, Cal Water has recently received some
assistance from the state, including a $136,000 grant for a pump
extension to reach declining water levels. However, the
community has continued concerns about the prospects for future
rate increases because of its limited ratepayer base. Just this
week the Lake County Board of Supervisors adopted a resolution
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to explore further solutions to increased water rates.
State Auditor Report Finds Opportunities for Cost-Savings at
Water Districts. On April 30th of this year, the State Auditor
released a report regarding the differences in water rates for
four Apple Valley Area water districts, two privately owned and
two publicly owned. The Auditor's main findings included the
challenges between investor ownership and public ownership,
where investor-owned utilities have greater ability to increase
rates (as noted above). The Auditor also raised concerns that
in some instances the water utilities had not done a good job of
demonstrating or instituting cost-saving measures. While the
report was based on only the four water utilities, the need to
demonstrate cost-saving measures to customers is one that can be
applied to other utilities.
Prior/Related Legislation
AB 1434 (Yamada, 2014) A bill with the same provisions as this
bill. Died in the Senate Committee on Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
One-time costs of approximately $331,000 to the General Fund
over two years for the development of feasibility plan.
Cost pressures, possibly in the millions of dollars, to the
General Fund or unknown special fund for the implementation of
the feasibility plan.
SUPPORT: (Verified9/1/15)
California Catholic Conference of Bishop, Inc.
California Environmental Justice Alliance
California Equity Leaders Network
California League of Conservation Voters
California Rural Legal Assistance Foundation
California Water Association
Clean Water Action
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Community Water Center
Environmental Justice Coalition for Water
Environmental Working Group
Food and Water Watch
Friends of the River
Leadership Counsel for Justice and Accountability
League of Women Voters of California
Lutheran Office of Public Policy - California
Northern California Water Association
Office of Ratepayer Advocates
Planning and Conservation League
Policy Link
San Diego County Water Authority
Sonoma County Water Agency
Utility Workers Union of America
Wholly H2O
OPPOSITION: (Verified9/1/15)
None received
The author states that "water district investments to maintain
and upgrade water treatment and delivery systems in areas that
have a small and/or declining ratepayer base leads those water
districts to often substantially increase the rates they charge
to customers. In some cases water rates have jumped as much as
300 percent since 2006. As the state's population of elderly
citizens living on fixed incomes increases, and as these elderly
citizens retire to smaller communities served by less
capitalized water systems, water rate affordability will become
an ever growing problem."
ASSEMBLY FLOOR: 55-22, 6/2/15
AYES: Achadjian, Alejo, Bloom, Bonilla, Bonta, Brown, Burke,
Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,
Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,
Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Lackey, Levine, Lopez, Low,
McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk,
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Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Weber, Wilk, Williams, Wood, Atkins
NOES: Travis Allen, Baker, Bigelow, Chang, Beth Gaines,
Gallagher, Grove, Hadley, Harper, Jones, Kim, Linder,
Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen,
Patterson, Steinorth, Wagner, Waldron
NO VOTE RECORDED: Brough, Chávez, Dahle
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
9/3/15 14:01:45
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